11 Things To Know About First Time Buyer Programs

There will come a time in our lives where we want to buy a house. It’s not the easiest thing to understand because of so much information these days. We often rely on friends or family to give a few tips. We might use the internet and search for days never getting the right answers. Whatever the case, we need to understand the process and how it benefits our needs.

Not all of us have thousands of dollars sitting in the bank. Most of us can admit we don’t even have a savings account. However, we know a house is something we’ve dreamed of and now it’s time to find out how to get one. The search begins and so does the learning. At first, it might seem daunting because thousands of websites want your business.

We can watch a video until our eyes give out and move on to physical reading material. Either way, research takes time and you might have other things to do. Use these 11 things to help guide you in the right direction when considering first-time buyer programs.

1. How do they work?

Too many think a first-time homebuyer program says they can expect a discount because they are new to the game. You must find out a lot more than looking for a break on the mortgage. First time buyer programs are set up so people have a running chance to get in the housing market, to begin with.

It’s a program offered to those with good credit who need home buying help. Deposits often are larger than we realize. First time buyer programs give you relief. What you’ll receive is a basic loan to buy your home. This allows you to purchase the house you have in mind within a certain dollar range.

2. Where are they available?

It will take some digging to find the correct homebuyers program that fits you and your family’s needs. Consider looking up the U.S. Department of Housing and Urban Development. All it takes is a quick look at their different programs designed to assist you. This site is easy to navigate for anyone who doesn’t have the best computer skills. Use the internet to your advantage and do a thorough search by city and state. This often returns a list of directories you can read during free time. (Related: How to Avoid Buying the Wrong House)

Each area has its criteria for your specific location. Settle in with some coffee and read all material so you understand what items they expect. Try the library if you want to drill down on first time buyer programs. We live in a digital world, so you can either search the library online or walk through the doors.

Make sure your searches are in relation to your characteristics. Are you a disabled veteran? Maybe you teach kindergarten? There are programs created and designed to work with specific people or groups.

3. What if I have bad credit?

Poor scores effect loans and the always have. You can’t expect miracles when you know your score has been in the dumps for years. It’s imperative to be proactive and start cleaning up your score before looking around. You can search, but to make deals with a horrible score only bring a series of declines. You’re not the only one battling bad scores as millions of people are in this position. There is luck down the road where the Federal Housing Administration has offered many loans to individuals facing low scores. You’ll also discover that there is a lot more leniency when looking at loans. Many financial institutions are going beyond bad scores and using other criteria to approve people. Here are some factors that can change things around for you, which some lenders like to see.

Big savingsLarge down paymentYears of job historyPromotions within companyMore income to debtOn-time payments

Your bad score will force you to find the lender that wants to work with your numbers. Most in this situation find it difficult to find lenders willing to take them on. It took the 2008 financial breakdown for lenders to change their tune when deciding on what the minimum requirements is for scores. Since then, things have slightly gotten back to normal and those with bad scores have more of a chance than ever.

4. Who’s eligible?

It’s important to pay attention to what makes you eligible for a first time buyer program. Not all of us pass even though we think we have a stellar score. Most of these programs look at your income limits. It doesn’t matter if you’re going for a loan with your state, local community or seeking help from the Federal government.

Your household income limit makes a difference. Other lenders might drill down on your income to debt ratios. This means if you carry a substantial amount of debt versus the amount of income you have coming in, you might get disqualified. Lenders want to make sure you can handle and pay the monthly mortgage bill.

It’s good to realize that you might need to make more money before getting that brand new house. Too many people assume they qualify because they are going for their first purchase. This is not what the program is about. It’s designed to give additional financial help to getting your first house. Every lender is different and so are their guidelines. Here are some basic requirements to consider.

FICO scores 500-720The higher down payment, the less the scoreThe lower down payment, the higher the scoreNo down payment depending on who and where the loan goes

5. What types are there?

It’s hard to find out where to start. All the loans seem the same until you read what each first time buyer program offers. Get ready to study to make sure you understand them. Here’s a list of loans for you to consider and have at your fingertips.

FHA Loans – Most people looking to get their first house flock to this type of loan. It’s good for those whose credit is a little on the rocks. You can get a guarantee on a portion of your home from the Federal Housing Administration. Once you get this kind of backing, you might only need to put down a mere 3%. Keep in mind, FHA loans have extra costs and some upfront fees. The lender does this to protect itself in case you run into trouble with the monthly bill.

USDA Loans – Believe it or not, the U.S. Department of Agriculture gives help to buyers. Many people find this odd and assume they need to buy a farm which is not the case. The goal of this loan program is to reach those living in areas considered rural. You get financial backing with a 100% guarantee. Depending on your region, there could be income limits.

VA Loans – If you’re a veteran, you’re in luck, as this program does what it says. The Department of Veterans Affairs helps those in the military get their first house. Qualified candidates can expect lower interest rates to no down payments.

Note that this is for those who’ve maintained up to 181 days of service as either an active or retired vet. Those in the reserves or National Guard must have honorable discharges and been in for up to six years. If you’ve survived an active or retired vet who passed in the line of fire or an incident that’s related to their service, then ownership is available to you.

NADL Loans – If your ethnicity is of Native descent, then there is an option for you when thinking about your first house. The Native American Direct Loans program is something to consider. Enrollment must be with either an Alaskan Native Village or an American Indian tribe. Further, the tribe needs to have a VA associated Memorandum of Understanding. They accept applicants in marriages with those who qualify. Make sure the VA gives you a Certificate of Eligibility for the loan by applying.

The Good Neighbor Next Door – This is also called the Teacher Next Door program. The goal is to help those educators or law enforcement officers remain in their communities and getting a new house. However, one must live in an urban selected area. Home buyers must live there for at least six months.

Local and State Programs– These are great for the buyer that doesn’t want to go looking all over the world for a good loan. You can stick to your community or State to begin your search. State housing regulators offer grants mixed with mortgages needing no payment. This gives you an opportunity to get good interest rates and breaks on any federal taxes. It opens up a buyer’s chance to stay in their specific area. Another attractive part of this program is that it seeks to assist by profession. This means you have a running chance if you’re a veteran, teacher, military personnel or a first responder. Check your area to see what’s available to you and your family.

HUD Homes – This program has a list of single-family houses offered to buyers for one buck. For those who don’t know, HUD is a part of the FHA. All houses within this program have foreclosed. However, the house has to have defaulted for at least six months to end up in the program. At that point, non-profits, religious and community government organizations that cater to families of low income can help buyers get their first home. Call your local program to find out how to take part.

Fannie and Freddie – These loans have been around since the 70s. Fannie and Freddie are the original initiators of house loans. They are government associated businesses who’ve developed a relationship with lenders in local areas. The goal here is to offer buyers more options such as lower down payments in the 3% range.

6. How long does it take?

When thinking about the wait, you need to understand that a buyer must get pre-approved first. There’s a process just like most steps when needing financial assistance. With a pre-approval, you need to think about how much of a house you can afford. Take your time as you do this. There’s no rush to get into a home you won’t be happy with. When you know the dollar amount you want to spend on a home, then contact a lender.

With today’s world of technology and so many lenders, it can take hours or weeks, depending on your financial situation. They’ll need all documentation. This might take you a while to dig them up in your home. Again, it depends on how organized you are. Many of us can admit, we have to look for our financial papers stored away in a dark closet somewhere. The goal here is to get your pre-approval letter from the lender. This is an important document showing you’ve passed the first hurdle to getting your house. Next, it’s up to you to prove all employment income and any extra money you claim you have to pay the mortgage.

7. How much money do I need?

It depends on the first time buyer program you pick to decide how much money you need. You may pay nothing if you qualify for a program with zero down payment. You will need money to pay the monthly payments, so it’s best to have funds already saved up. It’s up to you and your family to sit down and think about the size of the house you want. There’s no sense trying to get into a mansion when your saving accounts says your ready for something mid-size.

Take time to look online or visit a few open houses in your neighborhood. This way you can see what you get for the money you’ve saved. There’s no pressure to fork over thousands of dollars on a house that isn’t adequate for your needs. You might need at least 3 to 5% for a down payment so make sure you’ve saved at least that much. Not all first buyer programs are free so expect to pay something. (Related: 9 Apps to Simplify Your Move)

8. Can I use my bank?

Most people start with their bank that’s held their entire family’s accounts for years. It’s a comfort zone we cling to and come to appreciate. We know the staff and our long-term banking relationship could bring lower interest rates. Let them know you’re interested in the first time buyer programs. This will tell you if they’ve aligned within other qualifying organizations to make it happen.

Most bank representatives can give a good overview of what the programs entail. They’re the first ones to tell you if all of this will turn into a reality. You should also research on your own to see if there’s anything else they’ve missed or failed to tell you. Many like to stay with their bank because it just feels right. They don’t want to take the time to get associated with a different organization. Most community banks offer first time buyer programs, you just have to look for them.

9. Who to do I talk to?

When inquiring about a first time buyer program there are many people you can talk to. For one, you can start with the lenders. However, you might feel more comfortable talking to people who have been through the entire process. These are friends, co-workers, family members or trusted close buddies. They can give you firsthand knowledge about whatever drama they faced when applying for one of these programs. You now know what organizations you can call, but why not hear it from those who’ve experienced it? It’s up to you on where you get your information, but make sure it’s correct.

Everyone is different and because one person had a heck of a time with their program doesn’t mean you will. Listen to stories and mull them over to your situation. Most people don’t share their credit issues. Their first time buyer program attempts could have been a nightmare. Be open to their tips, but realistic when applying these situations to your financial life.

10. Where to Research?

The internet is powerful when we want to find out everything we can about first-time buyer programs. With one topic search, you’ll receive thousands of hits for websites attempting to give you all the insights. Use the internet to your advantage so you can get the best clear picture of these programs. Find the one that works for you and keep digging. Research always takes a while.

First-time buyer programs aren’t going anywhere and they might get better for the new homeowner. Join online forums where that’s the main topic. These are a gem of information that’s often better than talking to someone in person. People share every scenario they experience for the entire world to read. Most might shed light on a particular program you thought was great and it turns out it’s not.

Research helps us avoids big mistakes where you end up spending savings on something you don’t like. Online reviews are another great source. Read what new buyers are saying about the lenders and what the process entails.

11. How come I wasn’t approved?

It’s not a great feeling getting your hopes up to buy a house for the first time and you get rejected. You’re confused about what happens and it makes us frustrated. Yet, most of us don’t realize the big mistakes we make. It stops the entire process and feels like a huge setback. Having big expectations and knowing you don’t meet them is not the best way to get your first home. Consider some of these reasons as to why we don’t get approved:

Taxes

You will need at least two to three years of tax documents to show the lender. Now, if you haven’t filed your taxes in quite some time, you’re wasting everyone’s time. It’s understood that you’re busy and haven’t gotten around to filing, but a lender must see your income and the amount of taxes paid out yearly. Tax documents are a part of the pile of paperwork you must have ready for them to see. Don’t approach any lender if you don’t have these handy or haven’t even bothered to file. Tax information is essential for lenders to make the best decisions.

Credit

Credit is a funny issue in that we all don’t like to reveal we’ve burned it to the ground. Things happen in life and unfortunately they happen to our credit while out shopping, dealing with emergencies and having fun. Our credit is one of the biggest setbacks most experience when dreaming about their first home. Do yourself a favor and pull all of your reports. Hover over them by looking at every single line to make sure all accounts are yours.

Anything that appears out of place, dispute it. The point is to attack your reports and get your scores up. There is no sense, though we all do it, to call a lender boosting about your interest to buy a house when knowing you have mountains of debts. It sounds ridiculous, but so many people want to buy a house knowing full well their scores will change the situation completely. Don’t ignore your credit issues as you’ll set yourself up for a big fail in the house purchasing process. Find the problems on your report and fight them.

Many of us are surprised that going for a home loan often brings us aware of serious errors in our reports. You may have walked around thinking your score was bad when, in fact, it’s much higher than you realized. Take proactive steps to increasing your score. This makes presentable to any lender that wants to get you in your first property.

Down Payments

Don’t assume what the down payment will be, find out. This is another misconception people struggle with when wanting that new home. Most are scared off by the fact they have to pay out money in a deposit at all. Yet, no one asks, “do I need 3 or 20% for the down payment?” Once you have a firm number, it makes it easier when handling your finances. Don’t keep yourself in the dark and wait until someone tells you. You might miss out on some good home buying opportunities. Try to get a firm dollar about the down payment. This helps if you’ve only saved up a certain amount of cash. Keep in mind, that what someone else paid for a down payment doesn’t mean you will pay the same.

The Agent

You will work with a real estate agent in your home buying journey. Make sure you’ve found the agent or firm that has the most knowledge about first-time buyer programs. These professionals have seen it all with eager couples or small families hoping for their brand new property. They can give you information you’ve never considered. Select those willing to help your journey, not derail it. This means you want them just as excited as you are in getting your new home. Expect them to have years of experience with first-time buyer programs. They must give you resources and contacts to follow up on.

Bring a list of questions to your agent so they can help you as best they can. Once they review this information, your process goes faster and smoother. Don’t rely only on your agent to tell you everything either. You still need to do some background searching yourself. This helps you understand the entire buying process even more. By doing this, you’ll become a pro when looking for that first house. (Related: Home Updates That Add Value)

The Lenders

Home buyers must research the lenders. It’s a competitive environment and everyone will race to get your business. You can talk with friends or family, but you still need to put in the work of finding the lender that suits your needs. Dig more into their backgrounds to make sure there aren’t complaints filed for bad service. Read reviews of what former customers say about the lender you have in mind. Don’t settle for anyone telling you a lender is great until you can verify it. The last thing you want is to go through a lender that’s bad news and you’re left paying for it with a horrible mortgage. Lenders are online, down the street or could be a trusted friend. They have requirements they must meet like any other business. Do your due diligence to make sure they fall in line and are doing their part to help customers, not hurt them.